tv Squawk Box CNBC October 18, 2012 6:00am-9:00am EDT
latest to warn against the risks of not taking action. >> ceos are deferring investments in deferring hiring. so i expect to see if we don't solve the fiscal cliff in a sensible bipartisan way, i expect to see us drift into a zero growth economy and possibly a recession in the first quarter. >> this morning the financial services forum is sending a letter to congress urging lawmakers to work together to find a bipartisan agreement. it's been signed by 16 financial leaders. eamon javers will join us with the details. and then we'll be joined by jim rohr, he always has good insight into consumer trends, availability of loans, so we'll have a lot to talk with him about. and later in the show, tell pawlenty, former minnesota governor preparing to run the financial services round table.
pawlenty, former minnesota governor preparing to run the financial services round table. pawlenty, former minnesota governor preparing to run the financial services round table. pawlenty, former minnesota governor preparing to run the financial services round table. pawlenty, former minnesota governor preparing to run the financial services round table. pawlenty, former minnesota governor preparing to run the financial services round table. plus the sting operation that led to the arrest of a terror suspect yesterday. agents grabbed the man armed with a cell phone that he believed would detonate the bomb. authorities say the plot never posed an actual threat. andrew has this morning's top stories. >> that is amazing like out of a movie, but it was true. let's get to you some of the headlines. verizon reported third quarter earnings of 64 cents. matched wall street's estimates. revenues also in line. ceo says the company remains solidly on track to meet financial objectives for the year. meantime, they also announced they'll transfer $7.5 billion in pension obligations to insurer prudential. it removes a quarter of its long
term retirement burden with a single up front payment. american express in line with consensus. spending growth removed muted for the second quarter in a row. we'll talk to an analyst who covers the company at 6:20. and ebay earnings beating the street by a pen any. revenues in line, but the e-commerce company gave a cautious forecast for the holiday season amid a brewing price war between big retailers and amazon. citigroup insiders say they expect new ceo mike corbat to promote executives from within the bank rather than hire from the outside. core wbat has spent 30 years at
citigroup. yesterday he set up interim reporting lines for his executive ranks and one of the first major hedge funds to try to 3r0profit from a rebound by before i get to that, i never know when we're -- let me just mention corbat. great quote. citi's new ceo mike corbat appears promising despite his harvard education. >> that was the op-ed? >> yeah. the first -- >> in their actual editorial. >> between the idea that president obama is the fossil fuel president, the one who has greased the wheels for the fossil fuel industry, wink wink. >> and the phil gramm piece and the letter to the editor from
schumer. >> it has everything. yeah, i liked the phil gramm piece, that in previous election, we've never had people that have gotten to depend on the government so much. food stamp number up 65% in this presidency. no other president -- 25% increases. >> do you think this was the worst town tudownturn we've see? >> we've had they will before, but -- >> they weren't around for the great depression. >> but where was i. okay. so one of the first major hedge funds that try to profit from a rebound in the housing market by investing in foreclosed homes is now looking to cash out. reuters is reporting that och-ziff said it wants to exit
from that business. we had someone from -- of. >> i don't know if we've had him before. if not and he's watching -- >> you've tried probably. >> i haven't, but i probably should. >> the hedge fund is looking to make a profit on on a portfolio of about 300 foreclosed properties in northern california that were acquired at distressed prices. and a new report says two-thirds of the national college class of 2011 finished school with a debt. on average, owing about $26,600, that's bupup 5%. scott cohn still owes money -- no, he will join us with more on this story at 8:10. >> i owed money for a long time. when you owe the debt and then you can't find a debt that's a big problem.
how do you ever think about getting ut frout from under tha mound of debt. >> makes it tough if you can't find a job. you're up. are you ready? a nice color. >> like a burgundy kind of -- >> have you worn that before here? >> is that a wine? >> it's a wine color, yes. >> have we seen that before? >> yeah, i wore it last year. my head shots are -- the new ones. >> the accessories, is that part of the deal? >> no, this one he i bought myself. but they gave me the earrings. >> do you buy your accessories? >> i have people who buy my accessories. >> i probably shouldn't admit it. >> no, don't. >> i bought it on the street in little italy. >> oh, you did? that's nice. >> thank you. >> i know -- >> in global markets new, china's economy grew 7.4% year
over year. seventh straight quarter of slowing growth. numbers met expectation, but the first below government target quarter since first quarter of 2009. industrial output, retail sales and investment were ahead of forecasts, but people had been waiting on these numbers to try to get a real sense for what's happening because the picture in china has been such a concerning one lately. toyota reportedly considering trimming its production plan by about 2%. japanese news paper reports that is because of the drop in sales in china after the fight over the rocks in the middle of the sea. but the company denies it has altered its target. white house ordered review is said to have found no evidence of huowe spying on on china. the review reportedly concluded
relying on huawei was risky for other reasons. but remember when that report when we first started hearing things about it, we had carly fiorina on the set. >> we'll dacall it huawei. >> convenience store is wawa. >> i've been there. i thought barbara walters would have to deal with that. there's a column about -- >> senator johnson was very --
>> drought spoken. >> a bastion of liberalism. although herb seigal there. >> you both seemed to corner the columnist. diane said that -- >> oh, no, he wanted to based on last week when chris knoff was there giving advice to president obama on the next debate. you're dealing with a lying cheater, here's what you can say. do you know his story? an amazing story. ron gave a speech about you how obamacare would hurt his company and they said should you run for senate and he announced in may and won in november.
he was ceo of a company that does quite a bit of sales. >> we talked to him and he'll come back and talk more numbers. >> he's distraught that -- he said what do these people -- are they whis link past the graveyard. and you saw some of his comments in the column. >> i read it. i thought he was pretty good. >> you were pulling your hair out. >> i was not. let's talk about the fiscal cliff. the financial services forum is calling on lawmakers in washington to rise above and get a deal done before the nation heads over the fiscal cliff. aim mond eamon javers has the details. >> 15 of the nation's most you powerful wall street ceos, all
signing the letter going to capitol hill and the white house. they want to see some kind of a deal by the end of the year. they're saying the u.s. economy is at stake here. take a listen to what else they said. they say the still fragile u.s. economy can not sustain and the american people do not deserve the impact of more gridlock in washington. we urge you to negotiate a bipartisan agreement as quickly as possible to prevent us from going over the fiscal cliff. take a look at some of the power players who signed this letter this morning. lloyd blankfein, jamie dimon james gorman, wribrian moneynih. and also michael corbat. so clearly a message being sent
to washington. the question is whether washington can resolve any of this issues that they've been wrestling with for two years. >> is your expectation that this moves the needle or is this -- what is this expectly? >> i think what we're seeing is additional pressure being put on by wall street, by the business community saying you've got to come to a deal. they're signaling that they want a bipartisan deal, but what they don't say is what type of specific deal they want. they're not advocating tax increases, not advocating spending cuts, not advocating any particular plan. but there are business groups raising money to run tv ads on the fiscal cliff issue after the election. all of that is a coordinated effort, all those people talking to each other to try to push washington to get a deal and give a little bit of air cover perhaps for those members of congress who want to deal and want to have a compromise. they'll take a lot of heat from
their base. will gives them maybe centrist air cover. >> we'll be talking to rob nichols a little later, head of the financial services forum. >> who also signed this letter. >> do you think one of the reasons that you're not seeing them offer solutions in the letter is a function of the fact that frankly when you try to get 18 signatures on something, it's hard to get everybody to agree? >> absolutely. you have to go down the list of who is on the letter and see who supports tax increases just to take one example. lloyd blankfein said on cnbc that he is open to a deal that includes tax increases and he would pay more. i'm not sure everybody else on this letter would agree with that necessarily. so what they're pushing for here is just a broad agreement, but that's the trouble you've got in washington when you get democrats and republicans in a room, everybody will say, hey, we want a deal, but everybody says we want my deal. the trick is getting people to agree to get some of the other guy's stuff in the final deal and that's just been where they've been at loggerheads. haven't been able to do it. and my feeling is now that we're
more likely to go over the fiscal cliff at least for a couple of weeks. >> so really we're just talking about everyone finding agreement saying where he need to find a solution. the bigger problem is fiscal abyss. you can worry about the cliff and we'll probably get some band aid solution that push it is down the road, but the real problem is getting our arms around spending versus revenue. >> if romney wins, it's a
nonissue. >> if romney win, he doesn't get sworn in until the end of january, so there's the question of coming up with an extender. >> they would, wouldn't they, if he won and he knew who was going to be in the house, they wouldn't say there and say we're not going to do hf-- >> i think what will happen is if he win, he and the republicans in the house if they're still in control of the house, which everyone thinks that they will be at in point, they will come up with some kind of way to signal to the markets here's what we're going to do on inauguration day right after the big speech on capitol hill. so i think they'll send that message, but they won't be able to get it signed until romney is sworn in. unless they can come up with some kind of an unusual deal in which obama would sign a deal that romney would like. i don't see that happening particularly in obama just lost
to the guy. they don't have a whole lot of love for each other. >> everybody wants to extend the bush tax cuts for people under 250. the stick point is they said we will take you over the cliff if you don't raise taxes on 250 and above. that is the sticking point. almost unanimously democrats want to extend the horrible tax cuts if people under 250. >> whether you think the line should be at 250 or 100 or a million that's where the debate is. and the question is whether you can get people to back off some of these very hardened positions. this debate has always been about tax increases. >> it's a tortured debate. if you can say we absolutely can't raise taxes on anybody under 250, it will kill the economy, but it's okay over 250, because people save it or there's no small businesses over 250, whatever you want it say,
it's tortured. it's ideological. they're stuck with that position because of the first time they extended it and they got so much flack from their base. >> on the republican side, and you have lot of members who have signed this pledge at norquist's behest. >> there's good ideology and bad ideolo ideology. >> if it's your ideology, it's brilliant. if it's somebody else's, it's nonsense. >> i got it. how is john tur recity, is he working with you? >> he's a fantastic intern and i'm already starting to suck up to him so when he's high boss -- >> that's the way it works. >> he's been helping me on a long term investigative project and doing terrific.
>> he's a great guy, but let's not put too much pressure on him. he's been here for several week and i have no idea his ideology. >> he's a really smart kid. >> and you stole him from us. >> we love john if john is watching. >> he's always watching. >> time for the global markets report. >> basically nokia has reported earnings. ross had to continue programming over here in order to break the news. and despite bigger than expected loss, they did pete on the revenue side. shares are something in the range of 6%. but i want to quickly show you what else is happening in europe this morning. spain reported that its bad bank loans -- or its bad loans at span inch backs rose on 10.5% in
august. you'd expect that maybe to mean there is negative sentiment. not so much. better than expected auction and the start of the 22nd eu summit at which there is expected to be enough agreement to keep the monetary union together for at least a couple weeks is keeping sentiment positive. ten year rallying. yields falling to 5.42%. bunds moving up again as people look at debt mutualization as potential outcome here. quick look at what's happening an cross the european equity side. euro dollar had been higher, but now dragged a little lower by sterling.
back over to you. >> when we return, we'll talk about why quarterly results out of american express are raise izing a red flag on corporate spending. first, though, after the show logon to facebook, like the show and accepted us your comments or questions. >> there's the outfit. >> that's the last time i wore it. >> amazing. >> when i saw that promo, i thought -- >> you must really like it. >> that was the last time i wore it like six months ago. [ horn honks ]
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american express says spending growth remains muted for the second quarter in a row. david darst covers the company. david, we need two things. first of all, your take away about american express but then also your takeaway on the strength of the american consumer. let's start off with american express. what did you think of the numbers? >> the numbers were in line with expectations. underlying revenue trends were somewhat disappointing. it's a trend we've seen building over the past couple quarters. 00 currency headwind is magnifieding the deceleration in spending. number there is some of the other estimates actually show consumer is doing quite well.nu other estimates actually show consumer is doing quite well.sp. number there is some of the
other estimates actually show consumer is doing quite well. american express is coming from a different perspective in their year over year comps whereas consumers actually recovered faster from the crisis and so you're see something natural slowing down in different parts of the business. >> american express was one of the first to get rid of people, they were worried about the pull back with a be a problem. credit quality was still strong, but are they in the process of extending cards to more and more people? >> not at an above pure pace. what you're seeing with the loan growth is that the pay down rate is actually diesel crating. decelera decelerating. however with new card growth, at some point this 1201in 2013, lo should increase. but for now a low level.
>> how does that compare versus some of the other card companies? >> american express has brought down the reserve at a faster pace. expect stations are slightly different than capital one and discover. as we see discover's trends continue to improve, they actually have more earnings momentum building at discover and capital one, as well. >> so you would prefer those stocks over an american express at this point? >> correct. we have both discover buy rated and american express down to neutral after second quarter earnings. >> okay. david, thank you very much for your time. >> thank you. coming up, what's working now. doctor one top money manager says conditions are near perfect for investors to jump back into stocks.
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i was thinking where i would have put the appositive trophy there. i think i might have put it after the s because we're talking about all, i think trav. because it's all about you. >> it's a play on the word travelers check which has no appositiap positive appositive trophy. >> used to be a big fwois american express. you're top story is earnings. our next guest runs almost $200 billion as the head of tb asset management. and we can talk globally i
guess. >> let's do that. >> i remember seeing the consensus on china was that it could drop maybe to 8 and anything with a 6 or 7 handle would be worse than what people believe could happen over tlher. is the 7.5 within expectations? >> it was within our expectations. we've been expecting china to slow down faster than consensus. i wouldn't apply a lot of precision to the numbers. i don't think they have that level of position to them. >> kind of like the bls numbers, employment numbers some. >> yeah. the trending is not ideal. hard to know how much they'll be able to top down manage those numbers the way they have in the past. >> so do you think the worst has been seen?
starting to put europe on something that's been handled on a scale of one to ten maybe a 5 1/2 at this point? euro 1.31, greece will stay. >> it's fixed. >> yeah, it's fixed according toe to hollande. but maybe have they seen the worst, can we go to new highs in our averages? hollande. but maybe have they seen the worst, can we go to new highs in our averages?hollande. but maybe have they seen the worst, can we go to new highs in our averages? >> it's possible. i think the longer term issue is behind the short term trend. so our expectation is it would slow for a bit, but still a long term source of growth globally. so certainly the rates that we would be grateful to have in the developed markets. >> when you're thinking about whether to continue to buy stocks or bonds, how much does the fed and qe-3 play into your decision to stay long?
>> almost every country in the world is basically stimulatinst whatever they need to do to create some sort of stimulus to escape the vortex of the declines that we saw half a decade ago. and that's helping to drive -- that's probably the key or best global trend we're seeing today. lots of things on worry about, but with that much money in circulation, there's a limit to how bad it can go. >> long term we'll all be dead, but if it were that easy, why tonight we real don't we really ramp it up, ramp up qe-3 to qe-100 and let's do a trillion dollars a month. if there's no negative consequences to this -- >> there clearly is. >> when does it happen? >> diminishing marginal utility. the stimulus before they start up in, them, it was pretty
efficacious. once you start putting numbers on them, it doesn't have nimany impact. >> ear not worried that somehow we're inflating another bubble somewhere? >> of course we are. we're potentially setting ourselves up for a very big problem. these are unpress tecedented le of liquidity and no history to look at how to unwiped this. just the statement that we'll get to that later. because we have bigger things to worry about. we're not market timers. we don't allow our portfolio managers to do that. we don't encourage our clients to time the markets. that liquidity is creating some strength. you see it in the housing sector and a little bit in labor statistics. you're seeing it in earnings. basically our view is that actually the third quarter reportings that you're seeing now may be in the earnings cycle and we'll start to see recovery going into the fourth quarter. >> so where are your favorite places around the world to
invest and you can give us some names? >> we like the u.s. market most of all. we like mega cap stocks in particular because thelower. average stock price is 18 times multiple, that's pretty high. but if you look at the large mega cap stocks, they're at 13 times trailing earnings and there's probably a chance for high single digit earnings growth in 2013. so we kind of like those valuations. would he like at things with a strong balance sheet. are there issues about the uncertainties around the corner. we like firms with strong pre-cash flow and the ability to grow revenues and froe your dividends. we like stocks particularly as an asset class relative to bonds. >> seems to be you just described ge and comcast.
>> i'm not make any stock calls. >> i just made a couple. >> i try to avoid -- it isn't sector specific. it's really across the board. a strong balance sheet, record of ability to grow top line revenues. there is a lot of embedded operating leverage, but if you can't find the revenues at the margin, it didn't really matter. and it's the quality of the earnings growth. a lot has been you can't cut your way to greatness. so a lot of firms are reducing expenses. but how do you grow your -- >> what i meant to say is comcast and ge. thank you, brian. we'll see you later. i did notice that five points, market managed to trade up in the dow yesterday, but 0 poi40 s down from ibm.
>> i was looking and it was like why is comcast at a new high. up another -- >> dow closed up five, highest for the day. and by the way, we were talking about how the dow gained four days in a row, but yesterday up five, three or something on friday. >> some of the stocks, they almost look look they aike they drifting up. nd can sigh bernanke going -- and the money's like where do i go, where do i go. when we come back, the nation's most powerful banks and their bankers sending a letter to capitol hill urging bipartisan compromise to avoid the fiscal cliff. the thman independent ht correspondent joins us. over three and a half tons.ad small in size. big on safety.
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worry back talking about the fiscal cliff and the financial services forum is calling on president obama and congress to rise above and avoid going over that cliff. here's part of a letter heading to the capitol this morning and also to the white house. it says the still-fragile u.s. economy cannot sustain and the american people do not deserve the impact of more grid lock in washington. we urge to you negotiate a bipartisan agreement as quickly as possible to prevent us from going over the fiscal cliff. among the co-signers, lloyd blankfein, jamie dimon, james gorman, brian moynihan, and citi's new ceo michael corbat. >> already on withere?
>> already on there. joining us, rob nichols. his signature is there, as well. also a former treasury department official. good morning. >> thanks for having me. >> so i'm reading in politico yesterday that john boehner is quoted as saying he's not talked to the president about the fiscal cliff in four months. how is is that possible? >> yeah, it's hard to say. great question. one thing we're calling for in this letter is for both parties to work together so we avoid the fiscal cliff. there's considerable amount of damage to the economy that would occur if we go over the cliff. chairman bernanke has noted that that could plunge us back into recession. we could lose millions of jobs. the imf has said that if that happens, we would then perhaps set off a global recession. all sorts of really negative economic impacts associated with going over the cliff. so in the letter, one thing we
do urge, we're not prescriptive of what the long term deal should be, but one thing we do urge them to do is to work together in a bipartisan way and to have the house and senate, republicans and democrats, congress and the white house work together to avoid the market instability associated with going over the cliff. >> take us behind the scenes. when you put a letter like this together and get all of these signatures on the same page, is there is kafris conference call this just lobbyists and they get their boss to sign it? how much debate is there over for example providing pre-skrept difference solutions or how far to go in terms of there's a sentence that suggests for example that interest rates could increase materially. i know certain people who sign that had who i bet actually i'm not sure would agree with that. so how does that happen? >> one of our recent meetings, this is actually crisp by tdriv
ceos. they wanted to lend their voice to this critically important issue. so actually it was the ceos themselves that decided to do this. i helped facilitate it certainly, but the ceos discussed it and we're obviously pleased to have citigroup's new ceo lend his name, as well. this engagement will continue on the part of the financial sector from now towards the end of this year. obviously after the election,ic t i think the negotiations will continue with more intensity and we will continue to be engaged. i think the negotiations will continue with more intensity and we will continue to be engaged.i think the negotiations will continue with more intensity and we will continue to be engaged. but we wanted to lend our voice now to this important issue because on occasion we actually hear from people who say, gosh, going over the fiscal cliff wouldn't be so bad. and that's just hch- >> we just heard that this morning from our reporter aim
monday j aim mond eamon javers that it would be that bad for a few weeks. >> for anyone for say that it wouldn't be a big deal, that's a really big risk. one i don't think we should take. so two issues. one is the short term issue of not going over the cliff, that was the message that this letter intended to vconvey. and then the second issue is about what should the long term deal aspects look like. and there's been a lot of work done. >> but there's not the same agreement on the idea of how we fix the bigger problem as much as there is don't go over the cliff right now. >> there isn't yet. but between simpson-bowles, gang of six, super committee participants, there's a lot of work that's been done and obviously post election there will be more work done. >> let me paint you a signature. let
picture. let's say president wins election, bobamacare stays, bus tax cuts expire above those 250. you know where capital gains go, dividends go about that that's the deal before everything goes in, plus we get all the taxes going up on small businesses above 250. that's better than going over? >> well, listen, joe, i don't want to speculate on -- >> you're telling everyone that they got to compromise on their principles on one side or the other. i mean, it matter what is the deal is, doesn't it? >> i don't dispute that. but we're asking for both parties to be responsible. the stakes are high. so we have two things that we need to achieve as a nation here over the next several months. one is avoid the market damage and economic damage -- >> you know what i'm saying. >> i do. >> people saying why give any
extra revenue to an institution that doesn't hold money dear at all. doesn't think of it as -- >> listen, i understand. having served at treasury, i understand our long term challenges. interest on the debt is probably roughly 75% of our long term obligations. so as these policy makers work on this, we'll be a constructive participant in this. but these ceos wanted to lend their voice thousand about the importance of not going over the cliff so we can avoid the damage. >> they'll be reporting a bunch of crappy quarters and no one wants that. >> rob, thanks for joining us this morning and sharing that letter with us. hope to have you back as hopefully the debate does not continue, but i imagine unfortunately it will for quite a while.
>> coming up, we'll take flight with the ceo of southwest airlines. if we want to improve our schools... ... what should we invest in? maybe new buildings? what about updated equipment? they can help, but recent research shows... ... nothing transforms schools like investing in advanced teacher education. let's build a strong foundation.
southwest airlines reporting earnings of 13 cents a share, that was a penny better than expected. gary kelly is the company's chairman and ceo and gary, thank you for joining us today. >> thanks for having us this morning. >> obviously the earnings came in better than expected although you point out in your press release that the revenue was a little lighter than you had anticipated. it was in line with what other airlines had been looking for. what happened in the month of september and what do you see in october? >> this is the third year in a row we've really seen a bit of a soft patch in the summertime and at least in 2010 and '11 it was followed by a pretty strong autumn and winter travel season, so that's what we're hoping for. we're seeing pretty strong demand here thus far in october, but probably just one of these economic dips and i think we all know that the economy has been having a few hits and misses but otherwise i think our folks are doing a great job at southwest airlines and doing their best to work through a really tough
environment. >> what do you think is actually affecting consumers? what kind of pushes back on them in the third quarter in the september month? any thoughts as to what's been happening? >> well, two big drivers i think there's business travel and consumers, and there's a lot of evidence of course that business investment has been falling off here in 2012 and we did see some softness in our fares that are primarily purchased by business travelers. business travelers were there, but it felt like we needed a little bit more aggressive pricing to entice them. the consumer spending, on the other hand, seems to be stable and maybe evenng up a little bit of steam so we had a record load factor for the third quarter so it's certainly not that things are falling apart, and again, i think the main thing is to perhaps get on the other side of september and see how things go here in october, november, december, and thus far, our unit revenues are up 4%
in october and i'm very pleased with that. >> okay, so that sounds like it's all good news on that front. i noticed you had record levels for passenger revenue and unit revenue for the third quarter, too. >> exactly. >> all good signs on those things. >> higher fuel prices, what's been happening, that's hit a record as well, hasn't it? >> yeah, i think that's more particularly disappointing. we have seen prices all over the map here in 2012, and it looks like we're going to end the year with a higher price still, so we averaged $3.16 for jet fuel in the third quarter and looking at $3.45, which would be an all-time high in the fourth quarter. given some of the softness we've seen in demand, that's pretty disappointing so hopefully prices will ease from there, that's what we are hoping for in 2013 as well. if the economy of course improves we ought to see a better revenue environment which
would at least put us in a better position to pay for the higher fuel prices. >> you think about qe3 and whether all of the money the fed has been printing, maybe that's the reason for the higher fuel prices for less than expected passenger revenue coming in? >> i think it's possible because oil is dollar denominated but mainly oil has been tracking equity markets, and the fundamentals would suggest that prices at least in my opinion are way too high, but we are looking at product inventories, refined product inventories that are quite low, so hopefully crude price also ease some and that will incent refiners to pick up the slack a little bit and get some supplies out there and help on the pricing front. >> gary, thank you very much. we appreciate your time. >> thanks for having me this morning. still to come this morning,
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on the watch for earnings. [ bell ringing ] the latest numbers from verizon, morgue be stanley, travelers, plus what to look for when google reports later today. money and profits. pnc chairman jim rohr weighs in on the state of financials. invest in america. >> okay i'll buy from you. >> what? >> phil lebeau is in the auto industry heartland looking at how businesses are pumping in money and bringing jobs back home. the second hour of "squawk box" starts right now. ♪
welcome to "squawk box" this morning. i'm andrew ross sorkin along with becky quick and joe kernen. in the green room our guest host pnc financial services chairman jim rohr, he'll join news 15 minutes to discuss the banking sector, vikram pandit's departure from citi. google earnings will be out after the bell, "squawk" is searching for the answers that matter to your money. we'll tell you if the stock is a buy ahead of the numbers. later in the program, tim pawlenty, incoming ceo of the financial services roundtable will join us. we have a very busy show ahead and both of you guys, joe and becky i'm talking to, are looking through earnings from travelers. >> yes. looks good, $2.22 a share versus expectations of $1.61. we'll see if there's anything that helps that much but total
revenues were $6.5 billion versus estimate of $5.79. >> we look at the policies written which did come in at $5.7 billion. >> is policies written? >> let me look at the net written premiums. >> revenues net of premium so that's right in line with expectations. do we need to back out anything from the $2.21 then? because that's a 60 cent beat on $1.60. >> it did have record operating income per diluted shares, they came in, benefited from lower weather related losses so that would make sense, fewer losses coming off the top, even if the revenue comes in, in line. they did see rate gains, and improved underwriting margins on all three segments that they have. that number may be okay on the earnings per share. >> it's relatively recent dow component that whenever it reports usually jay fishman has to call us up and tell us what the true story is a lot of times
with the numbers. property casualty is a really tough to report results that -- >> management is saying they're very pleased with their continued progress which you should read into that, too, because they're straightforward when they have issues that come up. successfully improving profitability by actively but selectively seeking price increases and improved terms and conditions and of course that's the key when it comes to it, that with the weather pattern combined will tell you what quarter you have with it. travelers is a solid company. let's get to some of your other headlines, verizon citing strength in its wire business after it raised wireless data pricing and selling the latest iphone. and the labor kept releases new claims for unemployment benefits. freddie mac is releasing its weekly mortgage interest rates which have been at record lows in recent weeks. china's growth selling to its lowest number since 2009,
latest numbers showing it growing by 7.4%. michelle caruso-cabrera will have more on the slowing growth and will break down the numbers in a little bit. we have other earnings news that came after the bell yesterday, american express met analyst expectations of $1.09 a share, revenues came in at $7.86 billion, increase in customer card spending and higher net interest rate income helped the company in the third quarter. online retailer ebay also reported strong results that were a penny ahead of expectations, continued strength in its paypal business and marketplaces segment helped profit jump 22%. the company lifting expectations for the full year from $2.32 to $2.35 a share. time for an update on the overseas markets. ross westgate joins us now from london, hello, ross. you had your counterpart earlier. what can you tell us now? >> well, as we head toward the
end we've had three days of gains here in which time the ftse, the dax up around 2%, the cac up around 4% as well, so we've got a little bit of weakness, it doesn't shift the dynamics of the week too much. about 6:4, outpacing advancers at the moment. if the see down 0.1%. retail sales better for september, better weather and boosting clothing sales. volume and prices improving, a slightly better tone for the uk coming off the good employment figures yesterday as well. so it just puts whether we get more qe and an expansion of q negotiation november, it would be more of an edge. bp in focus, its russian adventure may come out okay, bp's stock a third of a percent, but it appears they have offered $28 billion in cash and stock for their share in the tnk/bp
joint venture. r rosneft is blocking out the other partner, and if that deal goes through rosneft will become the world's biggest publicly quoted oil producer. it means bp will have a stake in russia and they may be able to revive the offshore agreement. the ibex is down 0.8%. spanish auction, threes, fours and tens are auctions, raise 4.6 billion, and yields came down from september auctions, first time in a while we've seen yield auctions in spain come down, so good news for them as well despite the fact we did see bad loans jump up 10.5 from 9.9% in july's 10.5% in august, and if the bad loans keep increasing, the size of the bank bailout may
have to increase. at the moment yields in spain are lower in the cash market and in auction as well which takes the pressure off the spanish government to have to ask for any bailout and assistance and it may take the pressure off the eu politicians to agree to something and that's the problem you need the markets to keep their foot on the throat of politicians to get the decisions that are made but as yields go lower they'll feel less inclined to rush into anything. that's where we stand ahead of the u.s. open, back to you guys. >> thaus mr. westgate, appreciate that very much. coming up next we'll talk about a bomb plot to blow up the new york federal reserve which was thwarted. we have the latest details on that story after the break. pnc financial services and chairman and ceo jim rohr will talk about the financial markets and vikram pandit's exit, and later we'll give you the numbers that should matter most to your money and what they're really saying about china's growth.
from the new york stock exchange and the site of the 9/11 terrorist attack. bangladeshi man arrested yesterday on charges he plotted to bomb the operation, the federal authorities provided the suspect with fake explosives. the 21-year-old on the country parked a truck filled with inert explosives and attempted to detonate what he believed to be a 1,000-pound bomb using his cell phone. he has been charged with atte t attempting to use a weapon of mass destruction. in convicted he could face life in prison. if not for the fbi -- >> they sold him the bomb. it does tell you our intelligence agency -- >> they're doing a lot of the things. >> there may be a little profiling if you come from that part of the world and they're not sure what the reason is, and there's a possibility, i think -- i mean the fbi must
have put itself in a position to be accessible to the guy in a certain way, right, and i mean, you've seen how many times in the past entrapment and crooks talk about entrapment but we were there providing but obviously we gave it to him okay, let's see what he does with it. drove it and parked it right there and he's got the cell phone, going, crap, this won't, you know, and then you move in. >> like a bad movie. terrible. >> yes, exactly, but you wonder what a 21-year-old guy on a student visa would ever be able to procure a bomb on his own? >> they could figure out how to make it. >> fertilizers and things, it can happen. let's talk the economy, the financial sector and politics maybe with our guest host, in the past i've seen jim rohr, chairman and ceo of pnc. you want everybody to deal with
pnc. >> absolutely, well maybe not everybody. this fellow at the federal reserve yesterday, can he stay away. >> you are careful not to be too partisan or political because you don't turn anyone away when they bring a cash to deposit. >> we turn some people away but mostly no. >> i saw your quarter the other day and it was up, it was above expectations, but the stock acted weird that day. what finally happened on that day? >> it was an interesting day. we had a 9:00 call. first of all we made $925 million, $1.64 for the quarter. >> you couldn't make $1 billion? couldn't you get it up to a billion? $924? >> loans grew, capital grew, deposits grew, customers grew and credit quality was good, expenses were flat so we really
had a good quarter. we have a thing called accretive capital. we bought the investments of rbc very well, we have a secretion that rolls through our net interest margin and it comes down every quarter. our net interest margin come down $100 million sequentially quarter to quarter and it will continue to go down minimally much less -- >> this wasn't explained well enough to the street? >> it was explained -- >> but this was tuesday, citigroup where all of the analysts are -- >> i was watching you, 20 minutes of 9:00, our call is at 9:00, watching you at 20 minutes of 9:00, and you announce thecy gro citigroup announcement. 9:00 is our phone call and usually have 300 something people on the phone, we have 81. >> your wife called in, what have you got? >> she didn't call in. >> she was watching citigroup, too. >> frankly -- >> so well one-fifth or
one-fourth of what you normally get. >> and the questions were short and you know, obviously it was a morning that there was big news. >> normally you have time to explain that to the analyst community and a lot of them weren't dialed in because they were -- >> hedge funds do what they do right away, so we had a good time talking to our major shareholders, it was a very, very good quarter. the issue about accretion coming down about dissipate over time. it's an eight-year issue and frankly what's happening is we're growing revenue right through the decline in accretion. that's the good news, because we're adding customers and the customers that came with rbc, the rbc acquisition is doing much better than we expected, 40 cents accretive this year so we're pleased with that. >> we're going to slowly get to morgan stanley here. i'm going to continue to talk to you and put in a couple things here, jim, but while i got you, did you know pandit very well? >> i tell you, you know, i've
gotten to know the group fairly well. >> did you have any idea there was a lot of tension with the board? . >> no, not really. especially in the last year i've been on the federal advisory council with him and very smart fellow, and actually has a sense of humor which you don't get to see on the citi calls. >> do you think he did a good job? >> i think he did a very, very good job. >> despite the stock price? >> despite the stock. you know, you think about it, you got the job before the crisis, so citi already had a series of issues, and then he gets the job but of course then he gets the crisis, so of course you have a huge bank that's got issues already, and then they've got the crisis comes and obviously they were in the middle of the -- >> like an obama argument. >> real quickly on morgan stanley just to touch on it, their income from continuing operations was 28 cents, the
street was looking for 24 cents, overall they did post a loss of 55 cents but again the continuing operations was 28 cents versus the 24 cents and it looks like net revenue came in at $5.3 billion. the street was looking for $6.63 billion but that 5.3 includes the negative 2.3 cba stuff so i don't know what the revenue number you should be matching up with it. i can tell you the street reaction is to trade the stock down, the knee-jerk reaction. >> so you got your take on pandit. do you know this new guy? >> i don't know. >> never met him? >> i've not met him. if you stop and think about what the citigroup job, it hasn't been in hindsight like a 15-year job, you know, for history. so you think about a fellow who comes in, deals with the issues,
for citigroup, everybody has their own expectations, right? very complex company. you change the board. the board, many new board members, they haul up their expectations and over a period of time you would think that you shouldn't be surprised that, after five years through a crisis that you might change the ceo. that doesn't mean you weren't shocked because i was shocked. >> out of all the activities thatcy group is involv citigrou how many is pnc involved in? >> citigroup's franchise in the u.s. is about half the size of ours. >> yet they're involved in all of these different -- >> they're large in credit card, and large in mortgage, and we're relatively small and core banking business, the wholesale banking business they're very large. >> you know what i'm getting at, what businesses are they in, that they shouldn't be in? it's too big to manage obviously.
pnc is managed much more effectively. is it because you're a genius, is it a more manageable business model? >> it's really a different -- >> you're probably in half the businesses of citigroup. >> i'm sure i am. >> half or more than half? >> well, if you include all their countries, if each of their countries -- >> then you're not even in half. >> we're not even in half, but they get hit by the global economy. they are the global economy if you think of the distribution they have around the world. ours is a much more focused business. >> could you run it? >> no, i couldn't even find -- >> even you couldn't run citi. >> even me, i couldn't find half the countries they're in, start with that. >> then nobody can run it so it -- >> would you need a different kind of person than myself. >> then it needs to be smaller, right? >> i don't know that it needs to be smaller but obviously the organizational structure needs to reflect the complexities of the company, and i think you know, the issues that we have all been dealing with during this crisis hasn't really allowed people to manage their companies effectively as they
might be. it will be interesting. i think vikram had them on the right path but the right path is a long road so we'll see. >> i wonder, is the implied backing still subsidizing their business activities, because it's so big? probably. >> probably. market probably does, yeah. >> what are you doing? this is your type of conversation. too big to fail. >> morgan stanley and another piece of news i'm trying to figure out. >> you don't have it now? you're not ready to go with it? what's the other piece? >> just give me one sec. >> oh, this is supposed to be big? >> it's not that big but it's interesting. >> i'll tell you quickly morgan stanley's number for the revenue number came in with earnings from continuing operations, 28 versus the 24 cents the street was looking for, better than expected and the revenue the number we should be using to match up $.6 billion, that's the xdva number, and better than expected $6.3 billion. >> so it's up now. what are you going to tell me,
not going to tell me gorman is gone. >> it's not banking, it's media news. "newsweek" is going to stop printing its magazine and is going all digital to bso barry diller is going to have "newsweek" come a digital reporting. >> given what the magazine reports that's a positive. let me know when "the new york times" decides that. >> thank you, woo! we'll be talking more about banks, maybe "newsweek" and other things and inside china's gdp numbers and what they're saying about the economy there and how it is affecting growth in the u.s. and then we've got google, expecting to report a 9% jump in earnings after the bell today. we'll go inside the numbers and talk to an analyst about what he's looking for. "squawk" is back in two minutes.
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lead, rain delayed the game in the bottom of the seventh. unlike the regular season, all post game games -- post season games must be played in full and can't be shortened by the rain. when play resumed nothing else happened, the cardinals took game three and lead the series 2-1. >> i was trying to watch that game and after the rain came on, and i didn't look up for a second i looked up and it was harvey levin was on my screen, it was golf with his polo shirt and they were talking about some -- i went oh my -- blinded. i think they stuck tmz on there because of the rain delay. >> they had nothing. you could have called in. >> we were all on tmz and you asked that question. >> richard lafrack asked that, tmz was so clueless. so whenever you see gossip on tmz make sure you confirm the details because in their eyes it was the guest host that asked.
they finally got it right. >> and a quick update the yankees -- >> are you still a virgin? >> i have two boys. >> this squawkward moment has been brought to you by joe kernen. the yankees stave off elimination one more day because of mother nature. before a pitch was even thrown officials postponed game four of the alcs. it will now be played today at 4:00 p.m. are you going to ask all guests that? >> no. but you know people say how could you ask that? that's none of your business. he's told, he's written a book about it! why do i know? i wish i didn't know that he was. i wish i didn't know that he was but i do know. but i want to know he's been a quarterback in new york for the last year and a half, you know, he's got all of the cheerleaders that brett favre is sending pictures too. >> my sister-in-law is with you, that was the question i had.
>> that was the question everyone had. now, did you answer unequivocally? you just sort of gave me some around-about. all right, so you're saying no. >> my wife is going to call in to joe later so you guys can have a conversation about that. up next we'll take a closer look at china's gdp numbers and three years after being left in the shambles by the near collapse of gm and chrysler ohio's auto industry is in overdrive, this is a story about investing in america and phil lebeau is in youngstown with the details a little bit from now. between black and white answers... ...and 1,000 shades of grey duff & phelps finds the sweet spot that powers sound decisions. duff & phelps financial advisory and investment banking services.
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welcome back to "squawk box" this morning. we've got a number of headlines, and a number of quarterly results hitting the tape. let's run you through some of the biggest names, verizon reporting third quarter earnings of 64 cents, matching wall street stilts. revenues also in line, verizon also announced late yesterday, this is pretty important, that it will transfer $7.5 billion in pension obligations to ensu s s
prudential. we'll have to keep our eyes to see whether other companies try to do the same thing. travelers reporting third quarter earnings of $2.22 a share, sharply above estimates. revenues just a bit short and check out shares of morgan stanley, earnings just coming out moments ago, 28 cents a share, x items beat the street by four cents. ex--dva $7.6 billion, also topping consensus. china's gdp growth hitting the lowest level since 2009, slowing to 7.4%. there are questions about how much faith you should have in these numbers. joining us with the numbers behind the numbers is our chief international or correspondent, michelle caruso-cabrera. michelle, good morning. >> good morning, becky, yes. the.4% number for china's gdp a lot of people don't necessarily believe it and there's a reason for that. during the wikileaks scandal of
2007 one cable quoted l li keqiang, the current premier, he said china's gdp number is "man made." instead i look at electricity consumption, rail cargo volume and bank lending. so we wanted to do our own alternative look at china right now and see what their economy is doing and we're going to do these numbers in reverse. first let's show you what happened with new loan lending since 2009, as you can see and if you look to the right of the chart it has been falling. let's now go to rail cargo volume as well and you'll see a similar pattern which is going to show a decline. we say thank you to rhodium group which has put together all the data and the charts, they've been crunching numbers for the last 24 hours, this looks frightening, a big decline in freight traffic and then this is the big daddy of them all that we have numerous people on cnbc always quoting power demand in china. this seems to be the favorite data point when it comes to measuring chinese economy and it's been falling since 2010,
fallen off a little bit here in 2012. however, the guys at rhodium group say a lot of people obsess about hour demand, and they obsess about it for the wrong reasons. in china, industrial production is what dominates power demand growth over in china. it's very different than the united states. 75% of all power is commanded by heavy industrials, as opposed to here in the united states for example where it's only 30%. in china it's unique in china compared to anywhere else in the world and historically when you looked at power growth it was growing faster than gdp so if power growth was slowing you were worried about overall gdp. now what we've got on the screen is showing you, if you look at growth by sector the growth has fallen off in the major industrial sector, right, went from 12% a year ago to growth of only 3% year-to-date so far when you look at the left-hand side of the screen but in services,
has it fallen off the growth, yes. residential, it's actually climbed, so they say you shouldn't necessarily be worried about the decline in growth of industrial power demand because it's being more and more offset by what is a change in the chinese economy but we frequently hear jim chanos talking about this, the ceo of international paper when he was on, when we look at electricity demand we think china is growing at 2%. the question is whether or not you're looking at china through an old framework and whether we should look at it through a new framework and by the way it's all still growing, right? we didn't show you any declines, just a slowdown in the rate of growth. back to you guys. does that make any sense? >> completely. the whole thesis is the company has to manage its move from external demand to internal demand by consumers starting to move into the middle class and having, become a consumption society rather than an export society and that speaks exactly what to you're saying right
there. you almost look at that, i mean i'm not saying china's going gangbusters but you could make the case that's a positive sign for the country moving to that different model people say it has to move to. >> absolutely, joe and rhodium would also say when you look at the slowdown in growth in the services sector and the lack of it in the consumer sector, to them that looks like a soft landing, just like you said, not gangbuster growth but not a hard landing that if you looked only at the industrial production demand, you'd start to look frightened and they don't think you should look at it that way. i think it will be a road of potholes to make that transition is difficult and i don't think necessarily smooth. >> i still wish i knew what -- we put so much question on the way the numbers are compiled. i wonder, is that, we just bank on it, seven, whatever it was, is that really it, do we know for sure? 7.4, is that it in. >> you hear what li kiqiang told
the state department according to the 2007 wikileaks, said it's man made. >> what did you say rickey lee, the singer? >> not nicki menage? >> no, how that going. the president weighed in saying they're going to work out this, i hope so, don't you hope they work out this feud. >> yes, you don't want to be in feud with a rapper. >> you don't want to get shot. all right, we got to wrap. thank you. >> bye. coming up what google will say about online advertising, we're going to preview the company's quarterly results up next and today after the show it is "squawk box office hours." logon to facebook, "like" the show, send becky your questions and comments, she will be answering as many as she can. >> tell all the dirty secrets. >> you get the bottom of the whole andrew thing and starting just after 9:00 a.m. eastern time today, and while you're
doing "office hours" with us, keep it locked to "squawk on the street," lowell mcadam, chairman and ceo -- >> i'm going to write in anticipating. >> she might be enabling you. >> and the ceo of verizon will talk earnings and iphone sales at 11:30 a.m. eastern. "squawk box" is coming right back. [ male announcer ] you are a business pro. governor of getting it done. you know how to dance... with a deadline. and you...rent from national. because only national lets you choose any car in the aisle... and go. you can even take a full-size or above, and still pay the mid-size price. this is awesome. [ male announcer ] yes, it is, business pro. yes, it is. go national. go like a pro. yes, it is. when you take a closer look... ...at the best schools in the world... ...you see they all have something very interesting in common.
welcome back, everybody. let's take a look at the futures. we have had several earnings reports that have been out today, some of them dow components verizon and travelers. the markets are relatively flat. this is a very heavy earnings day, earnings to this point have been helping out this week. we'll see how it continues to play out this morning. google will begin joining the earnings parade after the bell today. let's get a preview of what to expect from google's third quarter, joining us now on the set is ben schachter of core securities, their internet analyst. what are you expecting? two or three things we should look for? >> broadly speaking the trends from the first half of the year are going to continue and they've been positive, top line doing better than expected and the company showing maturity in terms of not hiring too many people, focusing on the core business and doing a good job of
benefiting from people using the internet. >> is there anything we can extrapolate from the numbers when it comes to the future of facebook or any other internet companies or is going until a world of its own. >> in general there's a theme playing out for all the companies. what we've been telling our investors are don't overcomplicate this. people are using the internet more because it's available on better form factors more often. it's that simple in a lot of ways. >> how much of it should we be paying attention to advertising versus e-commerce. >> it's about advertising, they're playing about people conducting e-commerce online. for them it's all advertising. >> and google shopping has become an important piece. >> it's still advertising. you're not buying anything directly. overall it's e-commerce but advertise something people trying to sell things. >> is there any money to be made eventually off of android or any of these mobile, the mobile platforms they've created, that they give away for free? >> they give away for free but
they are making money. people are using the internet more often, that's what android is all about. if you're using the internet, if you're on your phone and tablet and searching for, they're making more money. >> do you ever see a day where they charge the oem? >> i don't see that. one of the worries is that the oems will try to get more money from google. you do a search on april veverie they don't put the false search engine as google for free. >> the anti-trust case, how much do you worry about that? >> as a headline risk that is a big issue. i don't think it will impact the numbers in any meaningful way in the near or long e-term but whe you have a stock move 30% in the -- >> if it's not going to move in the short or long-term, why is it a worry? >> because headlines matter. it's really been a sentiment with the stock and so when you have a sentiment move you look for what's a negative catalyst that may impact this and the
headlines coming out of europe and the ftc here that's a problem. >> you don't see the government trying to break up parts of the company, force them to allow certain other pieces on their operating system on their site? >> i think broadly speaking and i worry more about it in europe than the u.s. but broadly speaking the issue is will they allow google to decide what's on their search engine. google thinks they with you decide what's on their own search engine. the regulators because you're so powerful you're the de facto monopoly. fwo google would disagree. >> are there acquisitions you want google to make in this environment? >> they can but it's much more difficult for them than it is for virtual any other company. this has already impacted their business. you've seen them go after companies where the companies say well, if this deal doesn't work out, we want a large breakup fee, sometimes so large that it makes the deal not worthwhile. you saw them by the restaurant review company here. >> zagats.
>> i think they'd prefer to go after larger versions of that. >> motorola, what happens to them? >> they're refining and focusing that company. it's going to slim down, they have slimmed down already and going to continue and focus on high-end products and what's interesting to me it's not really about the phones in a lot of ways. it's about tablets and it's about the internet of things, having the internet available on more devices. >> and you don't expect that to impact relationships with all the other manufacturers? >> i think it's a very fine line. >> it hasn't happened yet. >> i think it has happened in a way. the oems around the world are saying what's going on here? everyone was trying to figure it out. we're not going to see the new products from a combined company until the second half of next year. at that point we'll have a better sense of how this will play out with the other partners. >> in the grand battle between apple and google and it appears google is winning at some level not necessarily terms in market cap but market share at least on devices, do you expect that to
continue? what do you expect to happen with windows? how do you look at this? >> i think amazon is a big part of that conversation as well, in my view within a few short years i think you'll be walking into whatever version of best buy is left at that point, looking at apple, amazon and google products. >> amazon stuff is built almost virtually on top of android and google products. >> it's a product they built and forked it off to their own version of an operating system. so you're going to see products from google, from amazon, from apple but if you walk in there, if you were buying a new apartment in manhattan and trying to figure out what tv should i get, what tablet, and you have a choice from apple, google and amazon, the other side, htc or samsung, which one would you choose in. >> you go one of the three stocks, which? >> still on google. >> thank you for joining us this morning. >> thanks for having me. a story we first learned about yesterday on "squawk" is creating even more buzz this morning. lance armstrong being dropped by sponsors left and right. remember we just saw nike was the first but we thought -- >> 8 out of 11.
>> the story plastered across the newspapers including the front page of the "wall street journal" this morning, take a look at this old ad, it's a nike ad that's circulating online. >> this is my body. and i can do whatever i want to it. i can push it. study it, tweak it, listen to it. everybody wants to know what i'm on. what am i on? i'm on my bike, busting my ass six hours a day. what are you on? >> your nike, you cannot be happy you paid money for this. >> there have been some questions whether his sponsors would go after him and sue him to come back out of it, but i think if you're one of his sponsors at that point, you probably don't want to keep bringing up the idea and dragging out the idea that you're affiliated with him. >> there's a conversation -- >> jim, what do you think? >> there's always risk when you
tie your brand with one individual, because anything can happen, whether it's lance armstrong or tiger woods story. >> but it wasn't just tying it to one individual, it was running ads basically claiming his innocence. that's what that was. >> well, that's a little risky, too, as you know. >> and tiger it was his personal life. >> right. >> this is different. >> i think it's qualitatively different. >> i have also looked around and seen some conversation about consumers considering bringing class action lawsuits against companies like nike that used him as sponsor in terms of how he was marketed. >> yeah but you'll have a tough time proving they knew something. i can see some class action lawsuit that comes up, but you're going to have a tough time proving any of these sponsors knew what was really going on behind the scenes. he was able to pull it off in front of all of the cycling authorities, why should they be wiser? >> except that for a while you had to really suspend a lot of disbelief, and the sponsors were like well, you know, until
there's something factual, i'm just going to bury my head in the sand like an ostrich. >> oakley is still out there. the last one. >> they're still weighing their relationship i think. >> when we get the final report or whatever, whatever the next shoe is to drop. >> it's a big step for nike, the only other time they stepped away from one of their athletes was michael vick and they picked him back up. >> it's also the way he's been for the last, indeed the famed outrage that you'd even bring it up with him is, you know, sanctimonious outrage. >> if you're a consumer, how are you harmed, because you bought the shoes. >> you bought into the you bought all the yellow bracelets. >> and you believed using the products allowed him to win the tour de france cleanly for seven straight times and maybe the product didn't help him at all. maybe you need to use steroids
to do what he did. when we return, morgan stanley swings to a $1 billion loss. we'll talk banks and beyond in the next hour. our guest host jim rohr, chairman and ceo of pnc. at 8:40, tim pawlenty will join us. up next, phil lebeau is in youngstown, ohio, as part of an invest in america today. >> we're talking about the auto resurgence in ohio, adding shifts, adding production and adding thousands of jobs. can it last? is it sustainable? we'll talk about invest in america when "squawk box" returns. ♪ [ male announcer ] how do you turn an entrepreneur's dream... ♪
years after being left in shambles by the near collapse of gm and chrysler, ohio's auto industry is in overdrive, with one in eight ohio jobs linked to the auto industry, it's a big reason why the 7.1% unemployment rate is lower than the national average. cnbc's phil lebeau is in youngstown, definitely up there in the middle of all this, and looking at how companies are investing in america. hey, phil. >> reporter: hey, joe. not your part of the state. >> no, akron. >> reporter: here in ohio -- you're more that southern ohio guy. >> right. >> reporter: you know in this part of ohio, the north and the northeast part of the state, they are seeing a huge boom in the auto industry. 17,000 jobs added since things bottomed out in 2009.
it's all part of the industry ramping up auto production here in ohio. lordstown symbolizes the rebound of ohio's auto industry, since nearly collapsing in 2009 the buckeye state added 5,000 auto jobs spurred by gm investing $200 million and expanding production at the lordstown plant. in marysville, ohio, honda runs two shifts per day on two different assembly lines and in toledo, chrysler added 1,100 jobs and invested $1.1 billion to keep up with demand for the new jeep wrangler. >> it reinforces the special relationship between chrysler and the city of toledo. >> they have put a tremendous amount of new investment into the toledo operations, really gives them a new lease on life. if we were standing here four or five years ago, there was a possibility there would be no jeep toledo operations if the chrysler corporation would have been allowed to fail. >> reporter: three years ago at gm and chrysler slid towards
bankruptcy, suppliers like seaway bolt outside of cleveland were forced to lay off workers. since then auto suppliers in ohio have added nearly 4,000 jobs, all part of meeting greater demand because auto sales are now at a four-year high, and more importantly for workers in ohio, the industry is not slowing down. >> it's a blessing to be working in the auto industry. >> nice hours, 40-hour weeks, making tons of cars, everything's good. >> reporter: the bottom line in terms of auto production and the ramp-up that we've seen here in ohio expected to continue for the foreseeable future and there are even some people, guys, who are talking about expanding production even further, perhaps adding more assembly lines at some of the plants here in the state. that would happen, if it happens, at least a couple of years from now. guys, one last thing we want to talk about. you might be saying where are you? why are you in this neighborhood with an abandoned house behind you? coming up later on today on cnbc as well as the other nbc channels, we're going to talk
about how fracking is bringing down the house here in youngstown. that's what we call a tease in the business. guys back to you. >> and a good tease at that. thank you very much, phil, we'll be watching. when we return we'll get reaction to morgan stanley's earnings, we'll find out if financials are a buy right now. and at 8:40, former minnesota governor tim pawlenty now heading the financial services roundtable. we'll talk about the fiscal cliff, the future of our economy and much more. "squawk" will be back in just two minutes. tdd#: 1-800-345-2550 this morning, i'm going to trade in hong kong.
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we're going to talk budget realities with tim pawlenty. >> plus a different kind of debt crisis. new data showing student debt at unprecedent eed levels. we'll bring you the numbers as the third hour of "squawk box" begins right now. ♪ welcome back to "squawk box" here on cnbc, first in business worldwide. good morning again, everybody. i'm becky quick along with joe kernen and andrew ross sorkin. and our guest host this morning, pnc financial chairman and ceo jim rohr. happens to be his birthday today. happy birthday, jim. glad you could spend your birthday day with us. our theme for this hour, debt and jobs. student debt increasing to record highs as unemployment and underemployment embrace the graduates. initial jobless claims numbers are hitting the tape at
8:30 eastern time. economists are expecting claims will tick up to 365,000 from the 339,000 we got the previous week. that number last week did catch a lot of people by surprise. then avoiding the fiscal cliff, the heads of 16 major financial institutions urging congress and the president to come one a bipartisan solution on debt. former governor tim pawlenty will join us in the bottom half of the hour, the incoming ceo of the financial services roundtable and predicting dire and immediate consequences if politicians don't solve our fiscal issues. first let's get to your morning headlines. >> several major companies have reported this morning, check out shares of morgan stanley, 28 cents a share beat the street by four cents, and then revenues, if you back out the dva, came in at 7.6 billion, also ahead of consensus. we'll talk to a banking analyst to get more details in a minute. verizon reported third quarter
earnings of 64 cents a share, revenues also coming in line, company announced late yesterday it would transfer $7.5 billion in pension obligations to prudential, the insurer. the company says the changes removes a quarter of its long-term employee retirement burden with just one up front payment, and a programming note, make sure to watch cnbc's exclusive interview with verizon chairman and ceo lowell mcadam today at 11:30 a.m. eastern on "squawk on the street." fellow dow component travelers reporting third quarter earnings of $2.22 a share, that was way above expectations, that he's a nice chart, too. revenues just a bit short, and southwest airlines reported 13 cents a share, a penny ahead earlier this morning, we spoke to gary kelly, the chairman and ceo of southwest. here's what he said. >> we're seeing pretty strong demand here thus far in october, but you know, it's probably just one of these economic dips and i think we all know that you know
the economy has been having a few hits and misses but otherwise i think our folks are doing a great job. >> among the other stories we're following this morning, citigroup insiders saying they expect new ceo mike corbat to promote executives within the bank rather than hiring from outside. yesterday he set up interim reporting lines for his executives, executive ranks. china's economy grew 7.4% year over year in q3, that's the seventh straight quarter of slowing growth. the numbers did meet economist expectations but the first below government target quarter since q1 of 2009. industrial output, retail sales and investment were ahead of forecasts. home prices were flat in september, while real estate investments slowed. let's get a check on the markets. we've been watching the future this is morning, they've been hovering around the flat line and continue to do that right now. we do have a lot of earnings
reports that have been coming out, some earnings reports better than expected including the numbers that we got earlier today from travelers, a dow component is indicated to open higher but again you have a lot of different numbers that are coming in, and do you have the dow up for four days in a row now. if you're watching what's been happening overseas in asia, last night markets closed up across the board, best gain came from japan where the nikkei was up by 2%. in europe at this hour you also continue to see some, well some green arrows in germany, it's up 22 points. markets in france and in london are slightly lower. joe? >> you get back now to morgan stanley, the company reporting third quarter results, earlier this morning, david hilder of drexel hamilton is standing by with more on the numbers. david, what were the key metrics for you? >> i think morgan stanley had a very good quarter as you said ahead of consensus. investment banking fees were up 10% from the second quarter, total trading revenue excluding
dva was up 33%, fixed income trading revenue, ex-dva was almost doubled, equity trading revenue up almost 7% and in the global wealth management business the morgan stanley, smith barney business the pre-tax margin improved to 13% in the quarter, up from 12% in the second quarter. so really no negative metrics there on anything that's important. >> how is that business with the individual investor and retail interest so low at this point, david, how did they improve operations? >> well, obviously morgan stanley has been integrated the smith barney business, they've gone through a technology transition, trying to hold down operating expenses and a lot of their assets under management are really fee-based in various ways so although at the margin the individual investor may not be throwing a lot of money in the stock market the individual investor has a lot invested in
the capital markets. >> that's a change, so they get like a 1% fee i guess just to hold those assets. it's a different business model than in the old days. >> david, i know they've been trying to take a lot of cost out of the quarter. >> good morning, jim, nice to hear your voice. i would say yes, again, it's not been a rapid process, but i think he's really making progress toward getting the pre-tax margins up especially in the individual or the global wealth management business. >> and fixed income was, how would you say that was? that was going to be weak everywhere, right? >> well, again, excluding the dva charges the fixed income trading revenues nearly doubled almost $1.4 billion versus $770 million in the second quarter. again, it's an environment as you know in the third quarter where we've seen rates going lower, we've seen expectation
about rates going lower and we've seen credit spreads coming in, so it's actually been a pretty good environment in fixed income trading. >> david, when you think about morgan stanley and sort of how the entire business model has shifted, really over the past sort of 12, 18 months, who do you compare it to now? it's not goldman sachs anymore. >> well, i mean i would argue that it hasn't really been directly comparable to goldman sachs since the merge we are dean witter in 199. it has a strong institutional business and a large retail securities business so there's really no other standalone comparable of its size. just to we mind you morgan stanley's wechlt banking fees were slightly less than goldman's and ranks number four globally for the quarter. >> does the current model make sense, are there businesses you'd want them to get out of completely? >> no, i don't think there's anything that they should get
out of completely. again, you could argue that the institutional business and the retail securities business don't have a lot in common, but again, the model seems to be working today. and if you look at other banks, whether it's bank of america or wells fargo you see a combination of financial and individual securities businesses together within a much larger bank. >> david as far as what you think of as retail operations for securities, it would be morgan, bank of america with merrill and who else, ubs, is there anyone else? >> wells fargo. >> wells fargo. they bought regional places. >> wachovia. >>ed w ed whwho'd they have? >> there was the old wachovia securities business was a combination of a large number of retail brokers who, that had
been purchased over a number of years. >> ag edwards. >> some of the regional places, yes. >> the last and largest would have been ag edwards. the almost everen securities, the former kamper securities. >> kiter and proulx and payne weber. who is the biggest, bank of america or morgan stanley? >> that depends on whether you look by the number of brokers or revenues, but i'd say that really the three that dominate the business today are bank of america, merrill lynch, morgan stanley, smith barney, and wells fargo. >> oh, really. you would think there's leverage there, because one of these days the market's going to go up over time and you figure, i always want to go back to 1982 and get those 20 years back. i don't know if we ever will. david, appreciate it. >> my pleasure. >> good to talk to you. when we come back we'll talk
about the real cost of college. some figures show some of the youngest members of america's workforce are starting deeper in the hole than ever and with the job market it it not helping them. scott cohn will bring us the numbers. next half hour, truth and consequences of the fiscal cliff. failure to reach a compromise could poison the economy and the clock is already ticking. former minnesota governor tim pawlenty and guest host jim rohr will join to us rise above the rhetoric and tell us how to avoid the fiscal cliff.
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welcome back, everybody. terror bust in lower manhattan. there was a sting operation that caught a man trying to blow up the new york federal reserve building. it was of course a situation where this is just blocks from the new york stock exchange and the site of the 9/11 terrorist attacks but get this, this is a bangladeshi man arrested on charges he plotted to bomb the building as part of a sting operation by federal authorities who provided the suspect with fake explosives. the 21-year-old who was in this country on a student visa parked a truck filled with inert explosives in front of the building and then' tempted to detonate what he believed to be 1,000-pound bomb from a nearby hotel using his cell phone. he has been charged with attempting to use a weapon of
mass destruction and provide support to al qaeda. if convicted he faces life in prison. as we mentioned before this is a greatest amount to the fbi and national intelligence forces to catch this before it became anything. america's student loan debt has hit a new record. our senior correspondent scott cohn joins us with ugly numbers. >> really tough for kids who are just starting out like my kids. these numbers come from the institute for college access and success, the seventh year they've done this study and this is a new high. get ready the average student debt for the class of 2011, $26,600. that is up 5% from 2010. two-thirds of last year's college graduates have student debt. what makes this so painful, of course, is the job market, on the surface, unemployment among college grads was 8.8% as of last year, higher than the national rate but consider this, nearly 38% of the recent grads that are working are in jobs
that don't require a college degree. much of the debt is concentrated here in the northeast. connecticut is the fifth highest debt totalling nearly $28,000, rhode island is fourth at just over $28,000 per graduate. number three is minnesota with more than 70% of the graduates there in debt averaging just under $29,000 and pennsylvania average student debt is just under $30,000 and the most indebted state is new hampshire with more than $32,000 in average student debt. three-quarters of the graduates in new hampshire have student loans. the lowest debt states, nevada, arizona, california, hawaii, and the state with the lowest average student debt is utah, just 45% of graduates have debt. the average there is just $17,000, still a lot of debt, though. the report recommends more programs to inform students and their parents about their options in terms of the types of loans and repayment options, more transparency on college costs, and preserving grants that help reduce the need to borrow. students are coming out already
sort of behind the eight ball with all of this debt and the job prospects for a good job, not good. >> that number you threw out, 38% are in jobs that don't require a college degree. that's astounding. >> it's astounding and again, you know, you hop on average of $26,000 in student debt and for a lot of people it's higher. you're just, you're already as i said behind the eight ball starting out. >> don't we have jobs that don't require college degrees? >> the rate on -- >> you need to be able to read. >> jim is here what, is the average rate on student debt? >> 6.5%, the federal student loans. >> it spreads out over a number of years. it's the job market that's the problem. one problem is -- >> of course. >> -- obviously tuitions have gone up regularly for 25 years. >> that's the thing you're chasing this college costs that are going up multiples to the rate of inflation and part of it is because look, anyone can get a student loan. so that fuels it, and you're chasing after these higher costs. >> you look at the unemployment
numbers though and the people who don't have college degrees have an incredibly staggering difference in the number of people who don't have college degrees, something like 14% if you don't have a college degree. >> that's one of the things the report talks about and we talk about is a college education worth it anymore? the students that just have high school degrees are worse off as far as the unemployment rate, it's something more like 20%. for people who just have a high school degree as opposed to college. >> only 60% of our students graduated from high school so you go down further and further across the board, the education process of the country really just isn't doing its job. you think about the future of the country, we have these low high school graduation rates, that's a major problem, and then the debt coming out of college is tough for the college kids, too. >> scott, it's a stunning report. thank you for bringing it to our attention. we'll have more from our guest host jim rohr throughout the show. >> one question for jim before
we run. becky had led off the segment, not led scott's segment but prior to that on this fbi sting and you said during a commercial break you think the biggest national security issue is actually around cyber security with banks. >> well, you think about -- >> you worry, have you had issues at pnc? >> we were attacked a couple of weeks ago, and we had this cyber attack, it was published in "the journal," and "the times" and a number of banks, there was an article about capital one and some others, and we had 38 straight hours of attacks on our systems, and we had the longest attack of all the banks, and you know, they just pummeled us, and now they're talking about they've sourced it from iran, but what it did in our case is it dramatically slowed our processes. i have to thank verizon especially and at&t, who had to deal with all this, a number of others, plus our employees. we were just barraged through every website, every portal we
have with requests. nobody got any money, nobody broke in, but it was really a very difficult situation. and if you stop and think about our country and the risks we have, i don't think any of us stay awake at night thinking there's going to be some army that's going to attack our shores or even a missile that's going to get us, i don't think, but if you have a cyber attack that totally disrupts our banking industry or if you think about an attack that somehow disrupts our power grid, you could really disrupt this country. think about if you shut down all of this stuff, the power grid. those are the two vulnerabilities that i worry will. i don't spend a lot of time staying awake about it but -- >> how much more money and effort do you spend on security than a year ago? >> it's multiples, we spend a lot more money in security than we ever did before. we continue to build systems. our vendors continue to build systems, we learned some things
in the cyber attack we just had a couple of weeks ago, doing more, even though nobody got in. we're doing more. >> one of the questions we ask you constantly hear about cyber attacks and things happening and you hear people say they got credit card files, but then you don't really hear about, you know, huge theft, you don't hear about billions of dollars getting stolen. why is that? >> well, because the industry, the banking industry spends billions of dollars in security. we in january for example are averaging about 250,000 pings a day, then it went up to 1 billion a day. >> pings on your website? >> on all of our systems, trying to break into our various systems, and then a billion a day. >> 250,000 pingzs a day. >> coming from all around the world and then it went to a billion and then we had this cyber attack and i can't even tell you, 58 gigabytes a second coming out for 38 straight
hours, pinging and dropping. >> what do you think the goal was? >> the goal, the stated goal was to disrupt the systems, but if you're really kind of paranoid about it, it's to test where the vulnerabilities are so you can come back with a different attack. >> this was all the major banks that were attacked. >> well, it's been sequentially, for the last month or so. >> jpmorgan chase, all of them. >> wells and ourselves and capital one i think it's in the paper this morning, capital one. now the people, whoever it is supposedly it's iran, have said they're just going to continue these attacks and they're not going to tell you when they're coming after you. so we just have to keep building it up. that's a big issue. it's a huge security issue for the country. >> what are the authorities telling you about who did it, what you can do, to the extent you can -- >> the authorities are being very guarded because if you
looked at, if you watched the attack, the attack was coming from russia, then it was coming from egypt, then it was coming from brazil, and it was just, the way they orchestrated the sourcing, it had nothing to do with the origination. >> you said iran. >> the newspaper the government traced it to iran. whether that's true or not remains to be seen but i would guess they're telling the truth but they're very careful about what they tell us. we've been working with the fbi and others in order to source this and in order to get back at it. and then there's copycats who follow. so it's a cyber attack is a very real, living thing and i think it's, if we think that we're safe that way, i think we're just kidding ourselves. >> scott, i'm glad you were here for that. what are you thinking, doc, prime time doc right? this is you. this, you know, criminal stuff and -- >> it's amazing.
>> look at you. >> yeah, you saw that. >> yeah, i did, wow! he's got the nose for that. that's unbelievable. >> that is unbelievable and it's true throughout the the country and in different industries. >> iran. >> power. >> and we're not worried about missiles right now but eventually we probably will be. >> eventually. >> now it's the cyber thing, all right. >> thanks for sticking around. coming up, breaking employment data, at 8:30, we got remember last week, those jobless claims? >> 336 it came in. >> now they think it might go back up, we might find the 30 that we lost last week or something, i don't know. economists are expecting 365, so we'll see up from 339 last week. the consequences of going over the fiscal cliff, former minnesota governor tim pawlenty says if politicians don't reach a compromise, we're facing a serious recession next year. he'll join us at 8:40 a.m.
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welcome back to "squawk box" everyone. in our headlines this morning, greek workers walking off the job today. this is the second strike in three weeks. protesters say that they want to show the eu leaders meeting in brussels that a new wave of wage and pension cuts will only worsen their plight after five years of recession. also a chinese company suing the united states government and
president obama for blocking its planned wind farm, warns the case will likely deter other chinese investment into the united states. last month president obama blocked rawls' corporation to build four wind farms in oregon, it would have been near a u.s. navy base. the committee on foreign investment in the united states argued the farms posed security risks. the chinese company counters the u.s. was discriminating against it because it was a chinese company. when we return, just a couple of minutes away from the closely watched weekly jobless claims numbers, economists are looking for 365,000 on initial claims, reversing the big drop we saw last week. right now as we head to a break look at u.s. equity futures you'll see right now mixed futures but everybody's right around the flat line. bob...
oh, hey alex. just picking up some, brochures, posters copies of my acceptance speech. great! it's always good to have a backup plan, in case i get hit by a meteor. wow, your hair looks great. didn't realize they did photoshop here. hey, good call on those mugs. can't let 'em see what you're drinking.
welcome back to "squawk box" this morning. we are just seconds away from weekly jobless claims. let's take a quick look at u.s. equity futures ahead of the numbers, we got a mixed picture, the dow would open up eight points higher, nasdaq would open up five points lower and the s&p 500 around close to unch.
rick santelli is standing by at the cme in chicago. steve liesman is here and we have jim iuorior also with us on set in from chicago. and we have about ten seconds. >> nobody has any idea. >> rick? >> all right, the reappearing 30,000 is back, because we jumped from 342 up to 388,000, so we're up 46,000, but of course we shouldn't look at it as though we're up 46,000, we should look at it probably like we're up more like 20,000, because there was a big drop last week, arguably a missing state, i'm not sure if there's been an admission there. i know california had a very large denial. so the numbers shouldn't be shocking but it puts us back where we ought to be. the preopening equities have been an about-face in the dow
futures by about ten, they were up about eight, now down about two, nothing huge, but i have to tell you, i'm a bit surprised. we've traded down a couple of basis points in yield and the reason it's important for all you kind of armchair technicians out there, the moving average is 180 1.80 to 1.81 in a ten-year. down here the moving averages aren't the first thing you look at but there's more detail with the technical analysis down here, maybe closer to 2% but it is significant. we're monitoring which side of 1.31 the euro currency hangs out on. the euro and the dollar index in particular may be more concerned about issues in china, considering the biggest economy in europe, germany, has a pretty important relationship on the export side with china. back to you. >> okay, thank you, rick. for more on the claims numbers, let's get to steve liesman and mr. iuorio, who we don't frequently get to see, sitting right here. >> not enough, thank you. >> did they miss that axelrod
memo let's do this three weeks from today, instead of today? shouldn't they have, what do you think, they've got lost in cyber -- maybe it got hacked or something, jim, maybe it was a cyber attack. did it just get lost in the shuffle do you think? can you put this off for another four weeks? >> the issue as you know government is very inefficient and not good at things so they can do -- >> what happened last week, do we know? >> we do not. >> why not? >> i called the employment and training administration, seems to be some separate entity within the bls, like five times i called four people, something like 20 calls. >> you said this is steve liesman from cnbc. >> i said steve liesman from krb become. usually that causes people to quake and respond almost immediately. and i was going to call out the employment and training administration fort the calls i made. >> i did get a statement that it was the, look, they made some comment as kelly evans did reporting on it, too, they made some comment on how the big
increase expected from one large state didn't show up and there was a clarification from a statement that came out from somebody. >> i read that statement and the reporting on it and i didn't -- >> they acted like the big increase didn't show but that didn't mean the state didn't report. >> i have no understanding of the statement or the reporting on the statement. i called for clarification and they did not call back which by the way is very different from the bls, the dedicated servants there, who are civil servants, joe, who have done such a marvelous job in my opinion, contrary, they called me back and i like them because they called me back, the employment training administration are on my you-know-what list. the economists not knowing what to do with it. >> this is unbelievable. >> the thinking was that the best way to come out of it, let me tell you the upside thinking, if last week was confirmed together with the housing, the sentiment and the other number, we could be time to consider a step shift in the economy, just one more second, jim. >> sure. >> now this number, let's just
average the two, throw them out and move on. jim? >> when i mess something up i'm reluctant to call people back as well. this leads me to believe there was some sort of an inaccurate reporting. this is an easier number to deal with. last week was baffling. this is what we expect based on two weeks ago the nfp numbers which are not great. there is something encouraging in the last couple of days, the housing starts number yesterday. we're not going to start seeing decent jobs growth until we see good numbers out of construction. we're not going to get back to construction being king like five years ago but if we get something back there, we can avoid the slog aening lo the bottom. >> there are estimates that people are looking at the housing numbers saying maybe my numbers are too low. i think it was ubs saying they had a $900,000 unit number for '13 and thinking it needs to be bigger. maybe if they did a million units, asterisk, used to do 2 million. >> we don't want to do 2 million again. construction was burning way too hot. that's great news, we want
something sustainable now. longer term like the stock market the fed has told us that regardless of the numbers getting a little bit hot they're still going to stay around the picture. now we'll have two tailwinds to the stock market. we could lose 20 based on the last three days but i like the stock market. >> can we ask, jim, the residential numbers have been better. there were some good banking data talking about credit quality improving. have you seen that in your book? are you willing to go an extra half a step further in terms of making a residential loan these days than you were six months ago? >> if you look at what's happened, it's been a very, very solid friend, credit quality has been better than it's been maybe decades in terms of residential mortgages these days. of course we had a lot of write-downs and put-backs than should be. if you look at the housing business it's gotten better and better slowly. the biggest thing we have in the country is multifamily construction, we think about what we did during, in the 2000s
with all the subprime lending the industry put people in single family homes and they came out of renters, a lot of them came out of the apartments. now the subprime is being foreclosed and written off, going back into the apartments and the apartments aren't apartments anymore, they're senior living centers and other things so now we've got a boom in multifamily construction across the country and apartment vacancies are below the magic 5%, around 4.7%, so when you think about buying a house versus renting today, and the rentals, the rental prices are going up and up with the low vacancy numbers, you've got a very, very low interest rate on your mortgage, so the relative price of buying a home versus an apartment -- >> that was the question, are you going a little further -- >> our mortgage applications running processing is up 29%.
>> over the year? >> yep and 70% of it's refinance, refinance to a great extend is crowding in with the purchase. we're actually moving more towards purchase, we're over 30% purchase because we want to be in that business when the refinance goes away but we're pushing hard on it. >> from a macro economic standpoint we'd rather see single family homes being the leader over multifamilies. is that true in your opinion? >> you would think and hope that it would be built over a long period of time. >> this is good, not as good as it could be. >> yes. >> the weekly numbers are obviously volatile, but is there any reason to think that monthly numbers can get, you know, that they can be really off? is there any reason to think this next friday number, first friday of the month that we get reverse of some of the weirdness in that last one? >> absolutely. things revert to the mean, joe, that's why if you have a big jump one month and the seasonals for example are off, it should catch that month or the next
month. >> i'm wondering whether you can extrapolate and say this is such an inexact science, who knows what we get on november or whatever it is. >> it is an inexact science, it is the best guess given by the funding that's given to the government on this thing. >> it's even more of a crapshoot. >> it depends on the reporting. >> this is the only time i remember a big jump in that weekly number in a long time. >> you can see the reverse. something was screwy. >> jim you do a the lo of work with hiring veterans. talk about that. >> we were very pleased we were just recognized as one of the best employers for veterans in the u.s., so we're pleased about that and we've really focused on them. we need employees and these are people of responsibility and will be looking for jobs so we've actually targeted that as a segment and it's working out extraordinarily well. >> the reason to bring that out,
steve, you have your own effort. >> i'm heading out to san francisco tonight, a concert with sammy hagar and bob greer and a really good guitarist, jonathan wilson will be at the sweetwater hall, charging 200 bucks a ticket, all of the group goes to the group called the coming home project provides counseling for wounded vets and helps them find work. >> we'll join you in that process. >> that's fantastic. it's a nationally organized group that helps them get back into civilian life. >> sammy hagar works with bob weir? >> yes, they have completely different kinds of music but they live down the road from each other. they're going to play "loose lucy." he wants to do a dylan song, a freddy king and a buddy holly song, so my band has been working on backing up sammy and we'll do a bunch of stuff with weir as well and stuff on our own, all for a good cause.
we're going to have a camera there and this will give joe hours of time to make fun of me on television. it's all about giving joe material. that's the way i look at what i do. >> helping the vets, i'm not going to make fun of -- >> me playing music. >> inthat might be. >> "loose lucy" is sammy's song he does with bobby. >> you'll share video monday? >> monday i'm out monday, i'm going to enjoy a little bit of rest. >> you'll be detoxing. >> no, joe, i'll be perfectly sober. >> bob weir and the dead guys? >> joe i may have one drink before i go on with that guy. there's too much to remember. >> i'm not talking about drinks. >> whatever you're talking about, joe, i'm going to remain as sober as possible. >> fine, that's your story and you're sticking to it. >> i didn't inhale. >> i don't think i exhaled was my problem. >> thanks a lot, jim, great to see you again. when we come back, if the november election is act one of our economic drama, act two is
the high stakes game of let's make a deal to avoid the fiscal cliff before the automatic cuts come in the at end of the year. up next we'll try to rise above the political rhetoric and talk about the truth and consequences of getting out of debt with former governor tim pawlenty, the incoming ceo of the financial services roundtable. "squawk" will be right back. is can esult, their students achieve at a higher level. let's develop more stars in education. let's invest in our teachers... ...so they can inspire our students. let's solve this. heartburn symptoms causedelieve by acid reflux disease. osteoporosis-related bone fractures and low magnesium levels have been seen with nexium. possible side effects include headache, diarrhea, and abdominal pain. other serious stomach conditions may still exist.
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we may get through the fiscal cliff by deferring it or by having something where, in the long run, it's not sustainable, because our budget deficit will keep growing wider and wider n which case the people who have to make decisions won't regard it as a real long-term solution. what we really need to do is fix the economy of the united states on a sustainable basis, so there's some predictability, so people don't stand on the sidelines and so they go and invest, and so jobs get created. >> that was goldman sachs ceo lloyd blankfein on the stakes of solving the fiscal cliff dilemma. in a letter to the congress and the president today, blankfein and other financial institutions urged bipartisan cooperation to come up with a solution on the fiscal cliff. joining us to talk more about the looming debt problem is former minnesota governor and president and ceo of the financial services roundtable governor tim pawlenty. good to see you this morning.
>> thanks for having me on. >> start by telling us what you think the stakes are if we do go over the fiscal cliff? >> well obviously the economy needs stability and predictability and certainty. you saw richard davis yesterday the ceo of u.s. bank in minneapolis make remarks the uncertainty surrounding the fiscal cliff could affect fourth quarter lending so that's one real life example of concerns about the fiscal cliff and if it's not addressed it will have more dramatic impacts than just that. we need a bipartisan solution that needs to be sustainable, it needs to be long-term and the contours of it, becky, i think are pretty well outlined. we're going to need spending reform that will have to include entitlement reform and also going to need tax reform and a pro-growth, pro-investment, pro-entrepreneurial direction. >> you say it's fairly well outlined, bowles-simpson, the rivlin-domenici plan? >> people have different versions of it but directionally people are talking about if you look at the pie chart of federal
expend tires, medicare, medicare, social security, interest on the national debt is already half way the line in the pie chart, those have to be reformed and then we have to look at pro-growth tax reform and that means we have to lower rates and we're going to have to, our members have signaled they're willing to look at eliminating or reducing exemptions, credits and deductions, those two things together are the cornerstones of directionally at least of how we're going to resolve the fiscal cliff. >> if there's so much agreement on the direction this needs to take, why have we seen absolutely no movement? we know we're in the middle of an election season. if this is this much of a problem for the country how come we haven't made more steps towards it? >> there are a number of reasons. people are waiting to see the outcome of the election because that's going to have an impact on which way this goes at least to a matter of degree and then two, everybody wants to see what the details are before they are willing to commit or embrace the package beyond just directionally. those are two of the reasons you haven't seen this tackled and
it's hard, a lot of the stuff is not easy, it's political controversial, sometimes unpopular, that's when leaders have to step forward and say we've got to fix this thing and i'm willing to take hits to get this done. >> what are we calling you governor, are you president of this? i don't want to call you president, that would be confusing. i'll call you tim. >> that's good, i've been called worse, joe. >> i remember. that was -- and you're not in that business anymore, so i need to ask you, you don't need to maybe spin this a certain way. you lower rates and you broaden the base, and this is sort of what we've talked about all the time, andrew, with what governor romney wants to do. seems if you keep the rich paying not any less than now, you make sure that it's the progressivity is maintained, seems like someone's going to have to pay more and it seems like it might be not just the rich but maybe everybody, maybe the middle class, but nobody's admitting that taxes might need to go up f you lower the rates
and get rid of deductions that net-net you may get more revenue from broadening the base and more people pay a little bit more. can you admit the middle class probably will pay more if we do something like this in. >> obviously you got to look at what the details are of the package, joe. let's be -- >> people say it has to happen or else there's a huge hole in the deficit, i don't know. >> well, two things. you want to have a reform that inspires growth and ignites growth, so that should help and then two the democrats in particular are saying we need more revenues and want people who are wealthy or higher means to pay more, there's a variety of ways to do that. for example in coming generations you might have wealthy or upper middle income people have means testing as it relates to certain parts of the entitlement programs. when you get into reducing exemptions, credits and deductions, if you say well we're not going to allow a full mortgage interest deduction for second homes or vacation homes or third homes, that would disproportionately affect the wealthy and bring in more revenue.
there's a variety of ways to have those impacts be on higher wealth or wealthier individuals, but i think part of the problem is nobody wants to embrace the whole package until they -- >> the wealthy don't have enough though. you can go to 100% and they don't have enough. that's what makes you worry middle class people are at the lower end, they have to give up something, some entitlements or their taxes are going to have to go up. that's the unfortunate situation. right? >> well there's a whole panoply of credits and deductions. >> you can hope for growth. >> doesn't go dollar for dollar with what you cut. >> governor, among your new constituents as part of the roundtable, is there any consensus on any of these issues that you could actually support on behalf of the roundtable? >> well, the roundtable has begun the work of trying to develop positions on fiscal cliff related issues and for example on corporate tax reform, they've said, look, we'd like to have rates lowered in a
pro-growth direction and we recognize as part of that, that we're going to have to give up some exemptions, credits and deductions. individual members are going to have different views of individual items but directionally, they're saying look, we recognize as a group, as a country, we're going to have to have >> you know, governor, if you had to lay odds on this, as we're looking at this on the fiscal cliff. what do you think the odds are that we get a solution or go over the fiscal cliff. i guess you could look at goinging over the fiscal cliff, one that we go over in a few days and one that we really go over it. >> i think the odds of getting this solved are high. the question is when, becky. when you think about when does change occur? it usually occurs in one of three circumstances. one is consensus, two is crisis,
and three is particularly gifted leadership. or a combination of the three. we don't have a consensus. we've got a deep divide on many of these issues, including this one. we hope for particularly gifted leadership. president obama, mitt romney, we hope whoever is the next president will rise to the occasion and lead through this crisis in a way that gets it resolved in the near term. >> but you're hoping it's not a market crisis that pushes something into happening? >> it's math at this point. you you know this. it's a matter of eighth grade math. the walls are moving into such a point that congress will have no choice but to act. we hope it doesn't require a market implosion to inspire that or require it. we hope that they can do it before then. >> governor pawlenty, thank you so much for your time this morning. >> good to see you, tim. >> you're welcome. thanks for having me. >> coming up, a familiar news magazine ending its print edition after 80 years. "newsweek" is going to stop printing.
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have a good one. see you later. he's over there. all right. >> there he is. >> prima donnas, you know. 8:54. i'm bored. >> ryan, hurry. you're going to be late. >> people don't understand what it takes to get a kid in a nursery school in new york city. >> people do anything for their kids. >> this is his third and final place, i think. hopefully, it works out. "newsweek" will publish its final print edition on december 31st after an eight-decade run. it will move to an all-digital format. the new version is going to be subscription based and available on e-readers, tablets, and the internet. the transition will entail, unfortunately, some job cuts. no word on how many. coming up, our guest host is jim rohrer, chairman and ceo of one of the best managed financial institutions in the country, pnc financial. >> tomorrow on "squawk box," our guest host will be former
mississippi governor haley barbour. he'll preside over a swing state showdown between ohio governor john kasik and pennsylvania governor john corbett. plus mcdonald's and general electric earnings. you can't afford to miss "squawk box" starting tomorrow. let's -- let's start over from the beginning. we were just driving along, comin' back from the lake, and all of a sudden, ka-plam. it blindsided us. what is it? our college savings account. how do you think it happened? not sure.
tame for our last word with our guest host, jim. we need to make two words, small business. how about it? >> how lucky. >> perfect. >> just read two random words. >> you had a survey. >> amazing you would pick that. >> pnc. >> we had just finished the survey with many, many thousands of our small business customers. interestingly, they're all doing better. they're all flush with cash. actually, small businesses have more cash than large business. and they're all spending money on productivity gains. but they're not spendinging money on large dollar amounts. when you ask them why, they have the same concerns we talked about this morning, whether it's what are my health care costs going to be in the future? what does the regulatory environment look like in the future? what's the the fiscal cliff? what's the deficit look like?
what's the election look like? so second and third quarter, you saw a fall in optimism in small business. they're going to cash. we had $1.7 billion of new small business loans the first six months, and our total loans on average fell because they're prepaying loans and going to cash. the good news is they're doing well, and frankly they have a lot of cash. i think, if we could turn this around and get more optimism, we'd get a real bump in this economy. >> jim, thanks for being with us. we're holding office hours after "squawk box." submit your questions. right now it's time for "squawk on the street." >> i've got some questions for becky. good morning. welcome to "squawk on the street." i'm carl quintanilla with david faber, michelle caruso-cabrera live at the nyse. look at cramer. >> he's in a hard hat.